Beware the cold callers offering to switch your life insurance to a cheaper deal... they could cost you dearly

When a company calls you out of the blue and offers to cut your life cover premiums, you might be tempted. Don't be.

In the past few months at least two firms, The Financial Assessment Centre and The Review Bureau, have been cold calling customers with existing life insurance or critical illness cover and offering to cut the cost - if they switch to a Legal & General policy instead.

Some of those who have received the cold calls claim those on the end of the line even suggested they were calling from the insurance giant itself.

Advisers are also alleging that both companies have failed to tell customers they target that while premiums might work out cheaper if they switch, they may also lose benefits and end up with a worse deal.

Watch out for cold calls offering to cut the cost of life insurance and critical illness cover

There is no suggestion that Legal & General is cold-calling, or has sanctioned such a move, and advisers say that the cold callers are most likely using the brand's name as it currently has some of the cheapest policies.

Alan Lakey, an IFA at Highclere Financial, has a client with an existing life insurance policy with Legal & General who recently received a call from one of the firms, which he says claimed it was Legal & General.

'They told her there was a problem with her existing cover and she had the "wrong" policy. Then they offered to fix the issue and put her onto a cheaper policy that was "correct" for her,' says Lakey.

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Instead of agreeing, however, Lakey says his client hung up and got in touch with him.

'She works in financial services and thought it was odd they'd call her like that out of the blue, so she rang me to ask if it was a scam and didn't switch cover,' he says.

'But there are lots of people - especially if they already have an L&G insurance policy - who would believe it was Legal & General calling them and trust them. That could leave them on totally the wrong type of cover and giving up benefits they really need for the sake of thinking they are saving a couple of quid a month.'

Lakey is not the only adviser to have had clients ring him up querying whether these firms are the real deal.

Despite the fact these bucket shops are both completely separate from Legal & General, my clients say that's not clear.

Mortgage broker Cathy Beaumont of London Money says in March The Financial Assessment Centre pestered her client, convincing her to switch from one L&G critical illness policy to a worse one, covering fewer health conditions, to save just £3 a month.

Both advisers say the firms have been cold calling customers with existing Legal & General policies as well as those whose cover is with another insurer.

Lakey says: 'Despite the fact these bucket shops are both completely separate from Legal & General, my clients say it's not always clear that they aren't calling from Legal & General itself.'

Phil Jeynes, a protection insurance specialist from UnderwriteMe - a service that provides a personalised quote for protection that takes into account your health and other details - warns that it's not just Legal & General customers being targeted in this way.

'To be clear this isn’t an L&G specific issue, they’re probably the provider of choice in this example because their pricing is keen at the moment,' he says. 'The problem is that policy definitions change over time and, depending on your circumstances, not necessarily for the better.'

If you want to switch it's vital to do your research properly or find an independent adviser

Are new policies worse value?

New protection insurance policies aren't necessarily worse value, but it is important to realise that they could be.

Cheap isn't always good. In life insurance, it can mean more limited cover for a shorter period of time.

But in critical illness cover, if you have become ill since you took out your original policy, a new policy is unlikely to cover this condition whereas your old policy may.

If you do opt to switch, insurers will accept existing medical conditions, but your premiums will rise to reflect that.

Cheap policies are also likely to cover fewer illnesses or only pay out on cancer if it's really 'serious'.

Jeynes says: 'Although, broadly speaking, present day plans cover a greater number of illnesses, it might be that the old definitions were less restrictive for certain conditions, meaning that your likelihood of a successful claim diminishes as a result of buying a replacement.

'It’s equally possible that the reverse is true, and a new policy offers better cover than your old plan. This minefield shows why advice (or at least very thorough research) is crucial whenever cover is reviewed.'

Emma Thomson, head of customer care at protection insurance broker LifeSearch, points out that although life insurance policies are 'quite straightforward' on the face of it, the differences in their offering, customer service and benefits can vary greatly.

She adds: 'With critical illness plans the differences are even more significant; the level of coverage and definition of conditions can affect the ability to claim. Unlike with, say, investments, you may only realise the mistake you have made with life and critical illness cover when it comes to claim, so be very careful when switching.'

Is it ever a good idea to switch to a different policy?

Giving up smoking could bring your premiums down significantly

There are genuine reasons for switching, such as if you have given up smoking or your personal circumstances have changed significantly.

'For people with health problems, irrespective of whether they’re replacing existing cover or buying for the first time, it’s crucial to not only consider policy conditions but also the real price of the plan,' says Jeynes.

'The initial quote most people see is the “standard” premium, which assumes you’re a healthy person. It’s only once the full application has been made that the genuine price is revealed and what looked like the best deal could actually prove uncompetitive.'

This is why it's vital to do your research properly or find an independent adviser who is legally bound to give you advice appropriate to your circumstances.

A word of warning on this - the jargon surrounding financial advice is confusing. An independent financial adviser might be 'tied' to just a few insurers, meaning they don't have to compare policies from every provider in the market. Some advisers are also 'restricted' meaning they just sell one insurer's products.

In fact this is true of The Financial Assessment Centre and The Review Bureau mentioned above, which are both sole-tied to Legal & General.

A statement from Legal & General said: 'Both The Financial Assessment Centre and The Review Bureau purchase their lead data independently. We can confirm that no data is sent, leaked or provided by Legal & General.'

Getting the best deal for you

Buying life insurance online directly can be the cheapest way to get a policy but it's not necessarily the best.

If you want a clearer view of the options available, it's worth finding an independent adviser who is 'whole of market' and checking with them that they cover every insurer.

Similarly, buying life insurance online directly can be the cheapest way to get a policy, but it's not necessarily the best policy for you.

If you would rather buy direct yourself, without advice, you need to do your research carefully and know exactly what you want, need, and are looking for.

For example, you might want life cover to provide for your family should the worst happen to you. But then again, you might want life cover simply to pay off the mortgage if you die before that's done.

One policy is far more comprehensive, long-lasting and therefore more expensive than the other and it's not always immediately obvious what the underlying differences are when you search online.

There are two good resources for those who do want to buy policies themselves. Low-cost broker Cavendish Online simply charges a one-off £25 fee and then puts all commission back into making your policy cheaper. Meanwhile, Fairer Finance rates life insurance products based on claims, complaints, transparency and gives an overall score.

To find a financial adviser who can help you sort life insurance you can use searches from Unbiased and VouchedFor.

Tom Conner, of insurance specialist Drewberry, says: 'People often see life insurance as a commodity but there all kinds of subtleties, add-ons and extra value that suit different people better.

'The number of conditions is important, as well as whether the policy is written into trust, index-linked and a host of other member benefits that come with policies these days.'

Whatever you decide to do, receiving a cold call from any financial services provide should ring alarm bells.

The safest thing to do is hang up, search for the company's official website online and contact them using contact details listed there.

This is Money contacted Legal & General, The Financial Assessment Centre and The Review Bureau for comment but all failed to reply to our questions before publication.